GOM Producers Can Terminate Royalty Deals if Others Get Better Terms

The five oil companies that signed agreements with the government last week to begin paying royalties on some Gulf of Mexico oil and gas production can terminate those deals, if other operators negotiate more favorable terms.

The Interior Department, trying to redo botched contracts that already have cost American taxpayers nearly $2 billion, reworked these deals with Shell Oil, BP, ConocoPhillips, Marathon Oil Co., and Walter Oil and Gas Corp.

Interior officials had failed to include price triggers in lease agreements signed in 1998 and 1999 for acreage in the deep waters of the Gulf.

Under the agreements announced last week, the five companies agreed to pay royalties on production dating back to Oct. 1. But in exchange, Interior officials agreed not to seek royalties dating back to 1998.

Houston Chronicle